Lloyds CEO Says TSB May Fail to Add U.K. Lending Competition

Lloyds Banking Group Plc Chief Executive Officer Antonio Horta-Osorio said the sale of TSB Banking Group Plc may have failed to boost competition among British lenders for small-business clients.

A forthcoming U.K. competition inquiry “suggests that these remedies may not have worked as intended,” he said in a speech in London on Tuesday, referring to steps by regulators, including the forced sale of TSB and Royal Bank of Scotland Group Plc’s Williams & Glyn unit.

Britain’s biggest banks face a probe into checking accounts and services for small- and medium-sized businesses, as lawmakers push to break the lenders’ grip on the market amid preparations for the U.K. elections in May. Opposition Labour leader Ed Miliband has said “breaking up the big banks” would be one of his goals if elected prime minister.

Caps on bank charges, providing more information to customers and structural separation had been tried before without success, Horta-Osorio, 51, said.

“Repeating the same types of remedy this time around is unlikely to be a recipe for better customer outcomes,” he told business leaders in the speech at the British Chambers of Commerce annual conference.

Competition could be improved with the use of digital technology and by enhancing the service for small-business clients seeking to switch banking provider, he said.

Lloyds shares declined 0.7 percent to 74.51 pence at 9:45 a.m. in London trading on Wednesday. The stock is down 1.7 percent this year.

Challenger Banks

The U.K.’s Competition and Markets Authority antitrust regulator is visiting banks as part of its checking account and small-business lending review, according to its website. It’ll publish its provisional findings and possible remedies in September.

Lawmakers are pushing for small lenders to increase their market share of personal checking accounts in the U.K., seeing it as a yardstick for measuring competition. Labour’s Miliband has said he wants to create two new challenger banks with about 12 percent of the U.K. checking account market if elected.

Banks with a checking account market share of less than 5 percent didn’t expand significantly in the past, according to the Independent Commission on Banking, a parliamentary-appointed review of financial stability led by John Vickers.

Share Sales

TSB had a 4.2 percent share of the U.K.’s checking-account market at the end of June, according to the company. The lender said in third-quarter earnings it’s picking up more new customers than anticipated.

Lloyds, 25 percent government owned, sold shares in TSB in an initial public offering in June to satisfy European regulators after getting a taxpayer bailout of more than 20 billion pounds ($30.6 billion) during the financial crisis. It must sell its remaining 50 percent stake in the lender this year.

RBS is yet to sell shares in its Williams & Glyn consumer unit, after regulators set a deadline for the end of next year. The bank received 45.5 billion pounds of taxpayer support.